For today’s young adults, settling down doesn’t necessarily mean buying a home.
These folks came of age during the economic downturn, watching banks fail and home values crash. Thus the idea of home ownership as a wealth building vehicle doesn’t ring true. According to the Wall Street Journal, “home ownership rates for younger Americans rates have fallen sharply over the past decade.” Younger generations to come are expected to choose renting over home-owning in greater numbers, a legacy of the downturn.
“Home ownership rates for younger Americans rates have fallen sharply over the past decade.”
Since the National Association of Realtors began tracking rates nearly 40 years ago the median age of home buyers is 46, the highest on record. The average entry level home price jumped 64% from 2012 to 2018. In 2001 48% of Americans 25-34 owned a home. In 2018, that number has sagged to 40%. While the fallout from this trend may be boosting today’s renter pools, there are economic concerns. Delays in home owning have kept some 20- and even 30-somethings living with parents. They have delayed child rearing as well. Both of these have measurable impact on the economy.
As potential first-time buyers have grow older, for many, rebounding home prices have outpaced wage growth. According to Freddie Mac, home prices increased 21% from 2000 to 2017, while wage growth only gained around 2.0% (adjusted for inflation.) In addition, debt-averse Millennials aren’t building their investments by other means. Federal Reserve data indicate that Millennial net worth has fallen by a third from year 2000 numbers.
All of these indicators suggest an active market ahead for rental homes in years to come.
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